The latest update on Australians and Australian households in the University of Melbourne’s HILDA survey which has been monitoring thousands of people’s habits since 2001 contains one reason why there aren’t many entrepreneurs Down Under. There’s more on the study here.
Amongst other things, the report analyses Australians’ attitudes to risk and how it influences financial investments and job choices. It found only a very small portion of people report being prepared to take above-average risks and even fewer report being willing to take substantial risks.
Couple this with the high startup failure rates which some groups estimate to be well above 50 per cent and you start to see why, when the country doesn’t have a huge appetite for risk, there aren’t many entrepreneurs around. Those that are still around struggle to land big amounts of funding for their business ideas.
The research found females tend to be more risk averse with 59.1 per cent unprepared to take any financial risk, compared to 44.8 per cent of males and people aged between 25 to 54 tend to be less risk averse than both older and younger people.
But the most risk averse age group are Australians aged 65 and over but younger people, between 15 and 24, also tend to be very risk averse with 57.7 per cent of this age group reporting they’re not prepared to take on any financial risk.
“A quite strong relationship between risk preferences and level of educational attainment is evident,” HILDA report editor Roger Wilkins said. “The clear pattern that emerges is that people with higher economic wellbeing have less aversion to risk than people with lower economic wellbeing.”
The data indicates few people are prepared to take “above-average” or “substantial financial risks” with just over half the population not being prepared to take any financial risk.
“To some extent, reluctance to take on financial risk can be an indicator of low financial literacy, which is supported by the finding that individuals with higher educational attainment and higher economic wellbeing are more willing to take average or above-average financial risks,” Wilkins said.
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